Slight differences in deeds carry import

In the context of a commercial real estate transaction, there are several types of deeds that may be used to transfer real property. One common type of deed is the quit-claim deed. Most everyone knows that property transferred by a quit-claim deed is being sold “as is,” with no warranty whatsoever.Where many become confused is in fully understanding what general warranty deeds and limited warranty deeds are, and how they differ from each other. The use of the word “warranty” is the first giveaway. By transferring title with a warranty deed, the seller provides the buyer a warranty regarding the validity of title for the real property that is the subject of the deed. The difference between a general warranty deed and the limited warranty relates to the extent of that warranty.When transferring property to a buyer by a general warranty deed, the seller warrants title against any and all prior problems, not just those that occurred during the seller's period of ownership.On the other hand, when transferring property to a buyer by a limited warranty deed, the seller warrants title only against problems that occurred during the seller's period of ownership. When a seller insists on using a limited warranty deed, a buyer should question the basis for that demand. Some sellers may simply use limited warranty deeds as a standard practice out of an abundance of caution. However, may also be a red flag that the seller knows about potential title issues that predates the seller's period of ownership. A title examination by a reputable title company will be crucial to resolving these questions.Finally, there is the fiduciary deeddeed is more frequently seen during economic downturns he type of seller using this deed, in addition to the individual handling a dead person's estate, is often a receiver or a bankruptcy trustee.In each of these situations, the party signing the deed will not be the party that holds title to the property, but a fiduciary who has been court appointed to handle the sale of the property.Like the quit-claim deed, a fiduciary deed does not contain any warranties of title. Instead, it includes a statement that the property is granted “with fiduciary covenants,” along with a reference to the legal proceeding covering the property sale. The words “with fiduciary covenants” means the seller promises to the buyer that he or she is duly appointed, qualified and acting in his or her fiduciary capacity, is duly authorized to make the sale and convey the property to buyer. Including fiduciary covenants assures the buyer that the property has been legally transferred, but nothing more.

Connie Carr is senior counsel at the Cleveland-based law firm Kohrman Jackson & Krantz P.L.L. Her practice encompasses commercial real estate, business, and financial transactions. She also is a founding author of The Ohio Real Estate Law Blog.

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